Home Brussels The EU wasted €60M on a pointless fintech fad — but the Belgians won’t let it die

The EU wasted €60M on a pointless fintech fad — but the Belgians won’t let it die

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A faddy EU fintech project that clocked up €60 million in development costs with almost nothing to show for it has been thrown a lifeline by the brother of Belgian EU Council chief Charles Michel.

Known as the European Blockchain Services Infrastructure Consortium (EBSI), the project — originally backed by the European Commission, 27 member governments, dozens of lobbyists and hundreds of EU officials — had hoped to use highly hyped blockchain technology to spruce up the bloc’s digital infrastructure.

But waning enthusiasm for blockchain initiatives linked to the technology’s repeated failure to deliver on industry expectations had seen the project relegated to Brussels’ backwaters.

That is, at least, until Belgium’s digitalization minister, Mathieu Michel, decided to use the country’s EU presidency, which expires in June, to rally support from other EU member states for a rebooted version of the flailing project.

Now, under the guise of a possible “metaverse” evolution, Michel has won around a dozen state endorsements for the project. Yet, concerns linger that the project’s ill-defined parameters and fuzzy mandate could see the EU under Michel’s guidance throw even more good money after bad in a bid to keep the whole thing alive.

Michel himself is not worried by the doomsayers. As an avowed “true believer” in blockchain technology  —  which famously hails from the decentralized settlement systems that power Bitcoin —  he is confident it’s just a matter of time until the technology proves itself. 

“Even if you lose €800,000, in comparison with what it could bring, this is not a waste of money,” Michel assured POLITICO in an interview in January. “The point is not to decide and even be sure that it will be the future. The point is to explore and do new things.”

In that vein, since the Belgian presidency began in January, Michel has focused on stripping what can be salvaged from the old EBSI initiative and finding ways to repurpose it under the new and expanded metaverse remit.

Unsightly downfall

Born in 2018, EBSI was founded as a kind of public-private partnership between the Commission, European tech consortiums and the EU’s 27 member countries, with a mandate to trial public sector blockchain projects.

At the time, many in the public and private sectors were convinced the technology could be used to decentralize data management systems across many areas, from electoral vote-counting and healthcare to digital identity and supply chain logistics, making them more resilient to attack from bad actors.

Inspired by this trend, EBSI poured money into developing a suite of blockchain tools, most promisingly a series of pilots focused on “verifiable credentials” aimed at protecting people’s digital identities from duplication or snooping. 

And yet, beyond the intermittent scramble for grants, officials say it struggled to keep participants interested or gain traction with key players.

The European Blockchain Services Infrastructure Consortium had hoped to use highly hyped blockchain technology to spruce up the bloc’s digital infrastructure. | iStock

“It was the least sexy stuff they could have been developing,” said one person familiar with the project, echoing a complaint made by most of the eight people POLITICO interviewed. 

Other setbacks over the years included the Commission’s legal prohibition from marketing its products to EU governments, constraining EBSI’s application to an array of niche, university-sponsored hobby projects, watched over by a few hardcore enthusiasts and untested at a significant scale. 

When POLITICO tried to get concrete data on user uptake in proof of concept trials from the Commission, a spokesman declined to comment on the record.

A further challenge came in the shape of the EU insisting on “strategic autonomy” for the development  of the systems, which prevented non-EU firms from taking part. Some of the key verifiable credentials cases developed by EBSI also clashed with existing regulation around digital wallets, officials said.

European member countries weren’t much help either. Having volunteered to operate computers that would power the distributed network, many failed to keep up their end of the bargain.

Two people familiar with the project told POLITICO that in some cases equipment was left sitting around unused in dusty ministerial offices, creating complications for the team working on the back end. Others, like Germany, abandoned the initiative to pursue their own blockchain initiatives. 

Eventually, even the Commission got bored with the experiment. In 2022, dissatisfied with the lack of progress and distracted by the new big thing — artificial intelligence — Brussels halved EBSI’s funding for the year ahead to €17 million relative to the €32 million it had granted the project in 2021. 

Facing a dearth of support and limited usage, by 2023 EBSI was looking fated to become a niche academic project, “slowly disappearing, getting less interest, less funding — and dying,” according to one dejected project official.

Support from the Commission has since been reduced to €10 million in grants and procurements, though these are yet to be allocated.

A dubious new leaf

And perhaps it would have died — were it not for the personal fixations of a digital minister who was looking to leave his mark on Belgium’s six-month presidency of the EU and who happened to be a fan of a fringe blockchain-powered virtual reality game called Sandbox. 

Inspired by the game, Michel took it upon himself to reinvent EBSI as a metaverse aligned system that he hoped would enable the transfer of real-world services online and incorporate the digital identity and supply chain logistics functions already trialed by EBSI.

“I think in the future there will be many metaverses,” he said of the effort, describing a scenario where unofficial property rights for virtual yachts could sit side-by-side with official ones representing assets in the real world. 

In 2022, dissatisfied with the lack of progress and distracted by the new big thing — artificial intelligence — Brussels halved EBSI’s funding for the year ahead | Thomas Coex/AFP via Getty Images

Michel soon joined forces with a handful of other Brussels-based blockchain advocates and revealed the plan to rebrand EBSI “Europeum”. Unlike EBSI, Europeum would succeed, he said, by being transformed into a private legal entity that member states, once signed onto, would be legally obliged to support and fund. Since then nine states have agreed to take part and another three have expressed an interest.

And yet, most insiders agree that without French and German support — neither have signed on — or funding that matches the billions being spent in the private sector, the project is unlikely to survive after the Belgian presidency expires at the end of June.  

Michel himself admits that many of the “philosophical and technical” use cases for Europeum are yet to be ironed out. For the most part, states are still being asked to subscribe to the building of a highway whose end destination remains unknown.

What’s more, Michel’s own metaverse ideas remain vague and highly speculative.

 “When Michel tries to explain what he’s doing he can’t make it clear because it is unclear,” said one project insider granted anonymity to speak freely. 

With the clock ticking on the Belgian presidency, uncertainty about who will keep momentum going thereafter is also beginning to weigh. For now, the sums at the project’s disposal are seen as both too big to fritter away on untested tech and too small to offer a fair shot at success. 

 “It would be a pity if they gave it all their support now and then just forgot about it,” said an official involved in the transition, granted anonymity to speak freely. “The test of fire is when the Belgian presidency is not there.”

POLITICO Pro subscribers received an earlier version of this article.

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